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Missouri Court of Appeals Rules for Debt Buyer in Lender Liability, TILA and FDCPA Case

In August 2017 the Missouri Court of Appeals affirmed a debt buyer’s right to enforce a credit card debt against a borrower. That case, styled LVNV Funding, LLC v. Linda Mavaega, Missouri Court of Appeals, Western District No. 80294, pitted a debt buyer’s (LVNV Funding, LLC) claim that it was entitled to collect on a credit card debt against the borrower’s claim that the debt buyer had no standing to enforce the debt and that the debt buyer’s right to recover interest was limited to the statutory interest rate (and not the interest rate set forth in the credit card agreement).

In ruling for the debt buyer, the court first considered the borrower’s theory that the Fair Debt Collection Practice Act (FDCPA”) precluded the debt buyer from seeking more than Missouri’s nine percent statutory interest rate. The borrower based this argument on the fact that the original credit card debt holder (Credit One) charged off the borrower’s credit card account in 2012 and then stopped sending periodic loan statements to the borrower. Borrower argued that, under the Truth in Lending Act (“TILA”), Credit One had waived the right to charge additional fees or interest on borrower’s account. See 12 C.F.R. 226(b)(2)(i). The court disagreed with the borrower’s position concluding that the debt buyer was not obligated to comply with TILA because it was not a “creditor” as defined by TILA; Credit One sold the borrower’s debt at about the same time it stopped sending loan statements (and thus had no authority to continue to send loan statements); and charging off an account in and of itself does not waive a creditor’s right to assess additional fees and interest against a borrower—the creditor must contemporaneously agree not to charge additional fees before such a waiver can be found.

The court then considered the interest rate that the debt buyer had the right charge. The borrower argued that the debt buyer could not charge more than Missouri’s statutory nine percent interest rate and that the debt buyer wrongfully imposed interest at the twenty percent rate. The debt borrower had initially charged interest at the twenty percent rate but later reversed those charges and charged interest at the nine percent rate. The court found that both parties were incorrect and that the credit card agreement allowed the debt buyer to charge interest up to the twenty-three point nine percent rate. Because of that, the court rejected the borrower’s FDCPA argument that she was subjected to a wrongful interest charge.

The court next analyzed the borrower’s claim that the debt buyer lacked standing to enforce the credit card debt. In rejecting that standing argument, the court considered that the debt buyer presented evidence demonstrating every link in the chain of assignments from the initial credit card issuer (Credit One) -- to -- FNBM LLC – to -- Sherman Originator III LLC – to -- Sherman Originator LLC –to-- the debt buyer (LVNV Funding, LLC). In ruling against the borrower on this standing issue, the court noted that the borrower failed to contest the evidence demonstrating the chain of assignments to the debt buyer and the court therefore considered these facts to be uncontroverted. (The evidentiary burden for the debt buyer would have been far less stringent had the debt buyer been enforcing a negotiable instrument, such a promissory note endorsed in blank, which can be enforced by the person in physical possession of the instrument without the need for proving a chain of assignments.)

Finally, the court considered the borrower’s argument that the debt buyer was not entitled to recover more than the amount the debt buyer paid for the borrower’s debt. In rejecting that argument, the court observed that the borrower failed to advance any authority to support such a position and that, by failing to offer some relevant authority, the borrower failed to preserve this issue for review.

Through offices in Kansas City and St. Louis, Martin Leigh PC keeps current on recent legal developments in banking, lending, real estate and business law in Missouri, Kansas and Illinois. As a part of its smaller, faster and smarter law practice, Martin Leigh PC publishes updates like this one to keep industry leaders informed of the current legal environment.

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